RNS Number:9698H
Interactive Digital Solutions PLC
26 February 2003
Interactive Digital Solutions Plc ('the Company' or 'IDS')
Preliminary Results for the Year ended 30 September 2002
IDS develops digital streaming software products for the delivery of digital multimedia and broadband services. The
Company's products are licensed to third parties for them to sell to businesses in the hospitality, hospital,
residential and retail sectors.
Highlights:
* Business expanded to cover hospitality, hospital, retail and B2B sectors
* Wandsworth deal signed, with potential to generate in excess of #1.2 million p.a.
* Teaming Agreement with BT to provide digital streaming software for the delivery of digital multi media and
broadband services
* New markets continually opening
* Business partner network now covers Europe, Middle East, Asia and Africa
* Funds raised to finance immediate working capital requirements
Gareth Pearce-Thomas CEO of IDS said: "This has been an exciting year for IDS with a dramatic expansion in our
commercial and geographic markets. The adoption of our RISC technology into the solution that the Wandsworth Group is
promoting into the NHS provides us with significant potential licence revenues. On the basis of the contracts that the
Wandsworth Group has been awarded to date, the annual license revenues that we could receive amount to in excess of
#1.2 million per annum for a 15-year period. Our software is now being utilised by major blue-chip institutions, which
is highlighted by our deal with BT where the RISC digital media streaming technology is being made available to them to
utilise in the delivery of digital multimedia and broadband services. We continue to progress the business well and we
are very excited about the direction and potential of the Company."
Chairman's Statement
The last 12 months have been very significant in the development of Interactive Digital Solutions Plc. We have
proactively responded to the economic slowdown in the international hotel sector by diversifying into, and opening, new
commercial and geographic markets. The Company now targets its RISC and Media Showcase software products at four
principal sectors: the original hotel sector, the hospital sector, the B2B sector and the retail sector. With contracts
signed in all divisions and business opportunities opening in areas such as serviced apartments, educational
establishments, cruise liners, tourist centres and airports, the potential for revenue generation has expanded
dramatically and the outlook is extremely promising.
However, due to heavy investments in our technology, digital platforms and business infrastructure in order to bring
our product to market, the Group continues to be loss making. In the year to 30 September 2002, the Group generated
turnover of #243,032 (2001: #0). Administrative costs totalled #1,350,041 (2001: #154,769). These costs included a
significant element of development costs written off which are not expected to recur. The pre-tax loss was #1,220,305
(2001: loss #151,820). We now believe that the progress that the Group has made over the course of the year provides
a solid platform from which the Group can move forward, and our software products have been developed to a point where
we anticipate that they will be able to generate meaningful revenues.
In common with many other smaller companies in our sector, we have limited cash resources available to enable us to
grow and develop the business. We constantly need to balance these scarce resources between development costs and
working capital required to finance new business opportunities. As at 30 September 2002, the Group's cash reserves
totalled around #30,000. Since then, cash revenues have sustained the business and we have recently gained access to
additional funds totalling #450,000 by way of a bank overdraft and an investment from Herald Ventures. Herald's
investment of #250,000 is, initially, being provided in the form of an unsecured loan which will be converted into
convertible loan stock following the Company's forthcoming Annual General Meeting. The convertible loan stock will be
redeemable in full (if not converted) on 31 March 2006, and will entitle Herald to convert the loan stock into new
ordinary shares in the Company at a conversion price of 2.75p per new ordinary share
In line with our strategy, we have significantly increased our geographical exposure by appointing a broad base of
national and international business partners to market our software. We are now well positioned in Europe, the Middle
East, the Far East and Africa and are pleased to announce that we have recently secured a business partner for North
America. With an expansive network of partners marketing our products internationally, we now have a firm base on
which to drive the business forward.
The development of our business partner channel continues to generate opportunities and in October we appointed Timna
Electronics and Telecommunications as a strategic partner for the Middle East. Based in Saudi Arabia, Timna will market
our software throughout 9 countries in the Middle East through its own network of in-country resellers, wholesale
distributors and retailers. These markets possess a plethora of hospital, hotel and retail opportunities that Timna
are well positioned to exploit. We recently opened up an excellent avenue into West Africa with the appointment of
Royal Sentry, part of Westminster International Ltd. With a high profile in Ghana, Nigeria, Ivory Cost and Cameroon we
have secured a business partner who has great potential in adding value to our business and reputation.
As highlighted in the Company's flotation document, the initial strategy of the Company had been to focus predominantly
on the hotel sector. The technology available to paying guests was distinctly out of date in comparison to advances in
digital communications and we saw an opportunity to supply our single unit business and entertainment console to
modernising hotels.
We have now appointed 14 business partners who are licensed to distribute our products, covering such territories as
Spain, Portugal, Italy, Germany, Austria, West Africa, South Africa, UK, China and the Middle East. Discussions are
currently in advanced stages to appoint further high profile partners in North America, the Pacific Rim and Asia.
With the RISC system we have a unique software product that has received a great deal of interest both nationally and
internationally, due mainly to its unique adaptable multifunctional digital nature. However due to circumstances beyond
our control, the hotel sector has been particularly depressed over the last year with a dramatic fall in occupancy
levels. These reduced levels have resulted in a substantial contraction in IT expenditure by hotel groups, which has
affected our levels of business in this market.
We have responded by pursuing alternative markets where, by initiating minor development, our technology could be
utilized and implemented. In particular, we have focused on the healthcare and retail sectors where we have managed to
secure major strategic partnerships and supply contracts that we expect to transform the business and its revenue
potential.
The Government's new "patient power" initiative requires digital bedside entertainment and telecommunication solutions
with the intention that these be installed in all NHS hospitals by 2003. The Wandsworth Group is actively pursuing
contracts to supply these solutions.
The hospital sector is currently one of the Company's most important markets following our agreement with The
Wandsworth Group, one of four government-licensed suppliers of hospital television and telephone services in the U.K.
In June 2002 we announced an agreement with The Wandsworth Group under which it will incorporate the RISC system into
their solution for which they have secured contracts to supply 12,500 hospital beds which equates to potential revenue
of in excess of #1 million per annum (now estimated to be #1.2 million) over a 15-year period. Since then, The
Wandsworth Group has secured further contracts and are now contracted to supply close to 20,000 beds. The rollout of
these contracts is anticipated to commence shortly with the aim of completing the installations prior to the end of the
year. Further successes in this lucrative market are expected.
As a result of the initial successes and our proven ability to work effectively with them, The Wandsworth Group has
also selected the RISC technology to drive their Telecall Broadband System, which they will be targeting at the
international hotel market. They will now be targeting hotels as well as hospitals during 2003 with RISC technology,
which will again expand our reputation and market penetration. We are hopeful that contracts will be secured for the
Telecall Broadband System in 2003.
We have also signed a teaming agreement with British Telecommunications Plc whereby IDS will provide BT with access to
its IPTV and digital streaming software products developed for the delivery of digital multimedia and broadband
services. The IDS platform was developed for use in sectors that require the delivery of a wide range of digital
services including digital IPTV and radio, email and internet access, music and films and other broadband and
narrowband services. As a result of the agreement we will use our expertise and software to assist BT's product
offerings in this arena, and work together to develop innovative and integrated digital solutions for a number of
market sectors.
The retail sector represents a further market being targeted by your Company. The Media Showcase System which has been
developed for this sector continues to attract significant interest from major chains both nationally and
internationally in such diverse locations as airports, tourist centres, banks and retail stores. The system seeks to
reduce the promotional costs of retail outlets by networking and streaming marketing campaigns over on-site plasma
screens and TVs. Courts, the leading furniture retailer, are continuing to roll out the system throughout its stores,
which it expects to complete by the end of 2003. Our business partners are currently in talks with a number of other
UK based retailers who are interested in using the technology.
Other avenues that our business partners are pursuing range from cruise liners to private apartment blocks. Through our
business partner AGT we are currently in the initial stages of installing the RISC system in a 100 unit motor home park
in Malaga, Spain, as part of a three phase project. We have recently signed an agreement with Teamtalk Inc to market
our digital platform into the cruise line industry. With large vessels requiring state of the art entertainment
facilities to attract clients, Teamtalk saw our platform as being an ideal fit and are exhibiting it at the annual
Seatrade Convention in Miami USA in early March.
We primarily remain a software development company and distribute our software under strict licensing agreements, so in
order to market our products we have set about appointing a broad range of specialist business partners. This enables
us to have a network of strong relationships that have the advantage of both critical mass and local knowledge, which
is extremely important for our national and international expansion.
There is currently a huge demand for software that provides effective technology platforms for the digital media
market. As a result we have made the RISC digital platform available to technology partners who wish to integrate their
applications into our platform in order to convert their analogue systems into digital and to dramatically reduce their
expenditure in time and investment. We are receiving increased levels of feedback and as a result, in 2003 we aim to
licence companies to use our technology platform in a variety of markets ranging from broking houses to racecourses.
Over the period we have also developed a network of strategic partnerships and alliances with major IT companies, in
particular BT, Thomson Multi-media and Allied Telesyn, which continue to reap rewards for us in terms of technological
advances, publicity and opportunities.
We announced during the year the appointment of Mr. Kevin Hamilton to the board of the Company as Finance Director.
Kevin has brought with him a wealth of accounting and financial management experience and is a welcome addition to the
board.
In conclusion I would like to thank Gareth Pearce-Thomas and his colleagues for all their untiring efforts during the
year in positioning the Company to take full advantage of the opportunities that have been developed to convert the
potential of our technology into ongoing revenue, and to continue to lead the way in digital media streaming.
Dorian Marks
Chairman
25 February 2003
INTERACTIVE DIGITAL SOLUTIONS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 September 2002
2001
Note 2002 (see note 8)
# #
Turnover 243,032 -
Cost of sales (114,986) -
Gross profit 128,046 -
Administrative expenses (1,350,041) (154,769)
Operating loss (1,221,995) (154,769)
Net interest 1,690 2,949
Loss on ordinary activities before taxation (1,220,305) (151,820)
Tax on loss on ordinary activities 66,868 -
Loss for the year 4 (1,153,437) (151,820)
Loss per ordinary share 3 (0.73p) (0.54p)
The accompanying notes form an integral part of the preliminary announcement.
INTERACTIVE DIGITAL SOLUTIONS PLC
CONSOLIDATED BALANCE SHEETS AT 30 SEPTEMBER
Note 2002 2001
# #
Fixed assets
Intangible assets 1,252,952 1,576,189
Tangible assets 74,986 36,428
1,327,938 1,612,617
Current assets
Stocks 5,697 3,773
Debtors 186,443 99,232
Cash at bank and in hand 29,347 659,000
221,487 762,005
Creditors: amounts falling due within one year (331,830) (430,375)
Net current (liabilities) / assets (110,343) 331,630
Total assets less current liabilities 1,217,595 1,944,247
Creditors: amounts falling due after more than one (20,969) (12,000)
year
1,196,626 1,932,247
Capital and reserves
Called up share capital 1,669,330 1,493,330
Share premium account 832,553 590,737
Profit and loss account (1,305,257) (151,820)
Shareholders' funds 4 1,196,626 1,932,247
The preliminary announcement was approved by the Board of Directors on 25 February 2003.
The accompanying notes form an integral part of the preliminary announcement.
INTERACTIVE DIGITAL SOLUTIONS PLC
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2002
Note 2001 2001
2002 2002 (see note 8) (see note 8)
# # # #
Net cash outflow from operating 5 (1,044,908) (238,115)
activities
Returns on investment and servicing of
finance
Interest received 3,226 3,007
Interest paid (347) (58)
Finance lease interest paid (1,189) -
1,690 2,949
Taxation
Corporation tax refund 35,072 -
Capital expenditure
Payments to acquire intangible fixed - (1,709)
assets
Payments to acquire tangible fixed (84,119) (34,810)
assets
Proceeds from the sale of tangible fixed 67,498 -
assets
(16,621) (36,519)
Net cash outflow before financing (1,024,767) (271,685)
Financing
Issue of ordinary share capital 440,000 1,500,000
Expenses paid in connection with share (22,184) (309,263)
issue
Loan repaid - (270,000)
Capital element of finance lease rentals (13,630) -
404,186 920,737
(Decrease)/increase in cash 6 (620,581) 649,052
The accompanying notes form an integral part of the preliminary announcement.
NOTES TO THE PRELIMINARY ANNOUNCEMENT
For the year ended 30 September 2002
1. GENERAL
The financial information herein does not constitute statutory accounts as defined in section 240 of
the Companies Act 1985.
The financial information has been extracted from the group's 2002 statutory financial statements
upon which the auditors reported on 25 February 2003. Their opinion is unqualified and does not
include any statement under section 237 of the Companies Act 1985.
The accounts have been prepared in accordance with applicable accounting standards and under the
historical cost convention.
Copies of the annual report are being posted to shareholders and copies will be available from the
company's office at Suite 3, Quayside Offices, Basin Road South, Portslade, East Sussex, BN41 1WF.
2. BASIS OF PREPARATION: APPLICABILITY OF GOING CONCERN
The group has incurred losses in the year, due mainly to costs associated with developing the
subsidiary company's business and product range.
During the latter part of the year it secured a business partner contract together with a purchase
order for the licence of its RISC system software over 15 years. The contract covers the licensing
for a number of NHS hospital beds which is expected to generate annual gross revenues in excess of
#1m. The company is dependent on its business partner to initiate the installation before the
revenue stream from the licensing contract commences. This process has been significantly delayed,
although the directors anticipate that this will commence in the very near future.
The directors have obtained a loan of #250,000 as well as overdraft facilities of #200,000. The
directors are confident that this, together with the anticipated future cashflows will enable the
company to have adequate working capital for the next 12 months.
On this basis, the directors consider it is appropriate to prepare the financial statements on the
going concern basis.
3. LOSS PER ORDINARY SHARE
2002 2001
Loss for the Number of Loss per Loss for the Number of Loss per
year shares share period shares share
# # # #
Loss for the year/ (1,153,437) (151,820)
period
Weighted average 157,682,499 28,345,617
number of shares
Basic loss per share (0.73p) (0.54p)
4. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2001
2002 (see note 8)
# #
Group
Loss for the financial year (1,153,437) (151,820)
Receipts from issue of shares 417,816 2,084,067
Net (decrease)/increase in shareholders' funds in the year (735,621) 1,932,247
Shareholders' funds at 1 October 2001 1,932,247 -
Shareholders' funds at 30 September 2002 1,196,626 1,932,247
5. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
2001
2002 (see note 8)
# #
Group
Operating loss (1,221,995) (154,769)
Amortisation 323,237 39,997
Depreciation 35,338 1,041
Profit on disposal of fixed assets (19,775) -
Increase in stocks (1,924) (3,773)
Increase in debtors (55,415) (70,089)
Decrease in creditors (104,374) (50,522)
Net cash outflow from operating activities (1,044,908) (238,115)
6. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
2001
2002 (see note 8)
# #
Group
(Decrease)/increase in cash for the year (620,581) 649,052
Cash outflow from finance leases 13,630 -
Loan acquired on acquisition of subsidiary - (282,000)
Inception of finance leases (37,500) -
Loan repaid - 270,000
Movement in net funds during the year (644,451) 637,052
Net funds at 1 October 2001 637,052 -
Net funds at 30 September 2002 (7,399) 637,052
7. ANALYSIS OF CHANGES IN NET FUNDS
At Non cash At
1 Oct 2001 Cash flow transactions 30 Sep 2002
# # # #
Cash at bank 659,000 (629,653) - 29,347
Bank overdraft (9,948) 9,072 - (876)
Debt (12,000) - - (12,000)
Hire purchase - 13,630 (37,500) (23,870)
637,052 (606,951) (37,500) (7,399)
8. ACCOUNTING PERIOD
The comparative figures dealt with in these financial statements cover the period from 26 February
2001 to 30 September 2001.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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